Corporate bonds? At 5 percent they are a good opportunity to invest – Corriere.it

For many, 2022 of the markets was one shock: everything went wrong, with the exception of the dollar and commodities. Simultaneous double-digit negative performances in almost all equity and fixed-income segments have disoriented many investors, even long-term ones.

But the beginning of 2023 reminded one thing that, actually, everyone knows: The markets react quickly. After a fall, direction can change suddenly and deliver important results. Staying out of the market often turns out to be a mistake – says Tommaso Tassi, country head Italy by Columbia Threadneedle Investments —. On the other hand, with inflation still high, having too much liquidity is not the optimal solution, because the value of the cash it is constantly being eroded by the loss of purchasing power. We have to deal with today’s reality, which is very different from that of a year ago. Back then, no one wanted to have bond in the portfolio, because returns were too low or negative. The acronym Tina, Theres no alternatives (there is no alternative – understood, to shares) has dominated the debate between operators and investment choices for a long time. But today there is an alternative. Are the bond, which after the violent monetary tightening, which continued last week with further rate hikes by the Federal Reserve and the European Central Bank, have once again found interesting prospects for a return. The success of issues with the Eni bond, which in January recorded demand for 10 billion euros from 300,000 investors, five times the offer, says a lot about the changed orientation of savers.

Today, moreover, the 10-year BTP yields 4% a year. The good quality corporate segment, globally, gives a return of 5% and more. The bonds high yield (high risk and return) travel around 8% and emerging debt slightly less. The only certainty is that the yields are back: in portfolio construction today one cannot ignore the bond Tassi says. The most interesting area is good quality corporate debt: in the lower quality part, below theinvestment gradethere will be an increase in default, some companies will have difficulty repaying the debt. Active management and issuer selection will make all the difference.

The slowdown in growth is a certain fact. What is not known is the extent of the braking. Which could weigh more than expected on the trajectory of corporate earnings. So far, however, it must be said that the US quarterly reports have delivered interesting results: despite the drop in revenues, profits remain solid in many cases, at least for companies that have a good pricing power (pricing power, ed) and which have therefore managed to transfer the increase in costs downstream, while remaining profitable: this is one of the characteristics that we systematically look for in the choice of shares in which to invest in our portfolios, together with low levels of debt and the quality of management. In 2023 we expect a notable increase in the dispersion of returns. The ability to choose the right names will be crucial.

Here, explains Tassi, there are also considerations that go beyond the perimeter of pure finance and embrace environmental and social factors, without forgetting the governance. It is worth remembering that behind many scandals, even recent ones, there is often a problem of governanceTassi argues. More generally, the analysis of these factors helps professional investors to better understand how companies are managed and how they position themselves in the competitive landscape. Our approach to sustainable investing is based on three pillars: on the one hand, the integration of environmental and social factors and of governance in the construction of all portfolios. On the other hand, the direct dialogue with the management of the companies we invest in: in 2021, to quote a figure, we conducted 1,800 initiatives of engagement (active shareholding, ed) with over 1,000 companies in 50 countries. Finally, we are involved in a number of international projects such as the Netzero asset managers initiative, a group of managers committed to contributing to the goal of net zero greenhouse gas emissions by 2050. Sustainability is a path. And we intend to do our part.